The Decline Of Los Angeles

Joel Kotkin
, ContributorI cover demographic, social and economic trends around the world.Opinions expressed by Forbes Contributors are their own.

Next week, Antonio Villaraigosa will be overwhelmingly re-elected mayor of Los Angeles. Do not, however, take the size of his margin--he faces no significant opposition--as evidence that all is well in the city of angels.

Whatever His Honor says to the media, the sad reality remains that Los Angeles has fallen into a serious secular decline. This constitutes one of the most rapid--and largely unnecessary--municipal reversals in fortune in American urban history.

A century ago, when L.A. had barely 100,000 souls, railway magnate Henry Huntington predicted that the place was "destined to become the most important city in this country, if not the world." Long run by ambitious, often ruthless boosters, the city lured waves of newcomers with its pro-business climate, perfect weather and spectacular topography.

These newcomers--first largely from the Midwest and East Coast, and then from around the world--energized L.A. into an unmatched hub of innovation and economic diversity.

As a result, L.A. surged toward civic greatness. By the end of the 20th century, it stood not only as the epicenter for the world's entertainment industry, but also North America's largest port, garment manufacturer and industrial center. The region also spawned two important presidents--Richard Nixon and Ronald Reagan--and nurtured a host of political and social movements spanning the ideological spectrum.

Now L.A. seems to be fading rapidly toward irrelevancy. Its economy has tanked faster than that of the nation, with unemployment now close to 10%. The port appears in decline, the roads in awful shape and the once potent industrial base continues to shrink.

Job growth in the area, notes a forecast by the University of California at Santa Barbara, dropped 0.6% last year and is expected to plunge far more rapidly this year. Roughly one-fifth of the population depends on public assistance or benefits to survive.

Once a primary destination for Americans, L.A.--along with places like Detroit, New York and Chicago--now suffers among the highest rates of out-migration in the country. Particularly hard hit has been its base of middle-class families, which continues to shrink. This is painfully evident in places like the San Fernando Valley, where I live, long a middle-class outpost for L.A., much like Queens and Staten Island are for New York.

In such a context, Villaraigosa's upcoming coronation seems hard to comprehend. By most accounts, he has been at best a mediocre mayor, with few real accomplishments besides keeping police chief Bill Bratton, a man appointed by his predecessor. So far, Bratton has managed to keep the lid on crime, a testament both to his skills and to the demographic aging of much of the city.

Besides this, virtually every major initiative from Villaraigosa has been a dismal failure; from a poorly executed program to plant more trees to a subsidized drive to refashion downtown Los Angeles into a mini-Manhattan. Instead of reforming a generally miserable business climate, Villaraigosa has fixated on fostering "elegant density" through massive new residential construction. This gambit has failed miserably, with downtown property values plunging at least 35% since their peak. Many "luxury" condominiums there, as well as elsewhere in the city, remain largely unoccupied or have turned into rentals.

More recently the mayor has presided over a widely ridiculed scheme to hand over the solar business in Los Angeles to a city agency, the Department of Water and Power (DWP), whose workers are among the best paid and most coddled of any municipal agency anywhere. Most solar plans by utilities focus more on competitive bidding by outside contractors. Villaraigosa's plan, which recent estimates suggests will cost L.A. ratepayers upward of $3.6 billion, would grant a powerful, well-heeled union control of the city's solar program.

This has occurred despite years of overruns on previous DWP "clean energy" projects. Not surprisingly, the plan was widely blasted--by the city's largest newspaper, the rapidly shrinking Los Angeles Times, the feistier LA Weekly and the last independent voice at City Hall, outgoing City Controller Laura Chick, who proclaimed that the whole scheme "stinks." Yet despite the criticism, a ballot measure endorsing the plan--opponents have little money to stop it--seems likely to be approved next week.

With his firm grip on political power, Villaraigosa likes to think of himself as a West Coast version of New York's Michael Bloomberg or Chicago's Richard Daley. Yet at least they have demonstrated a modicum of seriousness about the job.

In contrast, Villaraigosa, according to a devastating recent report in the LA Weekly, spends remarkably little time--about 11%--actually doing his job. The bulk of his 16-hour or so days are spent politicking, preening for the cameras and in other forms of relentless self-promotion.

So how is this person about to be re-elected with only token opposition? Rick Caruso, the developer of luxury shopping center The Grove and one of L.A.'s last private sector power brokers, ascribes this to a growing sense of powerlessness, even among the city's most important business leaders.

"People feel it's kind of hopeless. It's a dysfunctional city," Caruso, who once considered a run against Villaraigosa, told me the other day. "They don't think there's anything to do."

Certainly, odds against changing the current political system seem long to an extreme. The once-powerful business community has devolved into a weak plaintive lobby who rarely challenge our homegrown Putin or his allies in our municipal Duma.

Of course, entrepreneurial Angelenos still find opportunities, but largely by working at home or in one of the city's surrounding communities. They tend to flock to locales like Ontario, Burbank, Glendale or Culver City, all of which, according to the recent Kosmont-Rose Institute Cost of Doing Business Survey, are less expensive and easier to do business in than L.A.

"It's extremely difficult to do business in Los Angeles," observes Eastside retail developer Jose de Jesus Legaspi. "The regulations are difficult to manage. ... Everyone has to kiss the rings of the [City Hall politicians]."

Legaspi, like many here, still regards Southern California as an appealing place to work, but takes pains to avoid anything within the purview of City Hall. As the economy recovers, I would bet the smaller cities around L.A. and even the hard-hit periphery rebounds first.

The only immediate chance of relief for us Angelenos is if Villaraigosa (who will soon face term limits) takes off to run for governor. As the sole southern Californian and Latino candidate, he could prevail in a crowded Democratic primary. But the idea of this empty suit running the once great state of California--not exactly a paragon of good governance--may be enough to push even more people to the exits or, at very least, think about taking a very strong sedative.

Joel Kotkin is a Presidential Fellow in Urban Futures at Chapman University and executive editor of newgeography.com. He is finishing a book on the American future and writes a weekly column for Forbes.